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Technology Stocks : Network Appliance -- Ignore unavailable to you. Want to Upgrade?

To: DaYooper who wrote (10542)	9/15/2003 1:36:11 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 10934

Tech Highfliers Look Precarious Network Appliance, Sonus and J2 Have Surged to Huge Multiples, Leaving Little Room for Error By GREGORY ZUCKERMAN Staff Reporter of THE WALL STREET JOURNAL 915/03 With stocks entering a precarious time of the year, it may be time for investors to steer clear of some of the market's highest fliers, including Network Appliance Inc., Sonus Networks Inc. and J2 Global Communications Inc. The tech-heavy Nasdaq Composite Index is up 39% this year, and a heady 67% since the lows of last October. The gains for many stocks have been justified -- a near-panic last year sent prices to super-cheap levels, and more companies finally are spending on technology upgrades. But there are growing reasons to be nervous, particularly when it comes to some of the technology stocks that have led the market. Last week the Nasdaq was flat, despite falling more than 2% Wednesday. But the market is entering a period that can be unusually difficult to navigate. September has seen gains for the market only 35% of the time in the past 30 years, according to Bear Stearns. October has been better, but has witnessed some of the most brutal selloffs, most notably the crash in October 1987. With investors sitting on hefty gains this year for the first time since 1999, and some inclined to pare holdings to lock in their gains, some large investors are particularly leery about stocks that have boomed during the recent run-up but face tough competition. Network Appliance shares, for example, have jumped to $22.17 from just over $5 in October, amid growing sales. But the data-storage company is expected to earn only 34 cents a share this year and 46 cents next year. That means the stock is trading at 48 times next year's expected earnings. The Standard & Poor's 500-stock index, by comparison, is trading at 19 times forecast earnings for the next 12 months. Stocks usually don't go down just because they're expensive; there has to be a catalyst. In Network Appliance's case, there are growing efforts by companies such as EMC Corp. and even Microsoft Corp. to target Network Appliance's network-attached storage business, efforts likely to eat away at the company's impressive 60% profit margins, at least over time. Another reason for concern: Nearly everyone with a corner office is dumping shares. The company's chief executive officer, president, three vice presidents and two directors have sold shares -- all in just the past month. Executives sell stocks for all kinds of reasons, of course, but that's the most selling at Network Appliance in two years. "This selling definitely stands out," said Kevin Schwenger, an analyst at Thomson Financial, which tracks insider trading. A spokeswoman for Network Associates declined to comment on the stock sales.